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Budget 2023
Budget 2023

Budget 2023: Capex spend likely to slow on lower tax haul

Budget 2023: When Finance Minister Nirmala Sitharaman presents this year’s budget on February 1, she faces the daunting task of balancing a commitment to narrowing the fiscal deficit with keeping the engines of growth well-oiled.

January 18, 2023 / 07:16 AM IST
Pedestrians with buildings in the background in the Mahalaxmi area of Mumbai, India, on Tuesday, Jan. 26, 2021. Mumbai is among the most densely populated cities in the world. Photographer: Dhiraj Singh/Bloomberg

Pedestrians with buildings in the background in the Mahalaxmi area of Mumbai, India, on Tuesday, Jan. 26, 2021. Mumbai is among the most densely populated cities in the world. Photographer: Dhiraj Singh/Bloomberg

India’s pace of spending on infrastructure, buildings and other fixed assets will probably slow in the coming fiscal year, a development that could dent the nation’s ability to maintain world-beating growth.

To sell itself as an attractive destination for foreign capital, Asia’s third-largest economy has leaned on robust capital spending, increasing its infrastructure budget 39% and 26% in the last two years. But as recessionary woes spread globally, India’s tax collections and asset sales are likely to fall, analysts say.

When Finance Minister Nirmala Sitharaman presents this year’s budget on February 1, she faces the daunting task of balancing a commitment to narrowing the fiscal deficit with keeping the engines of growth well-oiled. India’s ambition to become the world’s factory hinges on enhancing infrastructure and smoothing out logistics — areas that still need plenty of government funding.

Government agencies also face the challenge of managing capacity limits, according to Rupa Rege Nitsure, an economist at L&T Finance Ltd. “The statistical base is very high and to spend above it year after year is not feasible within the given resource constraints,” she said.